It’s hard to believe almost any budget numbers coming out of Washington, D.C., these days. The reason? The Obama administration is cooking the books.

Okay, it’s not actually violating any law. But perhaps it should be against the law for the Office of Management and Budget to do what it routinely has been doing: putting out budget forecasts that everyone inside the Beltway knows are not real. If a private CPA did that, he would lose his license to practice.

Here’s the backstory. Health care spending in this country has been growing at twice the rate of growth of our income on a real, per capita basis. Although there has been modest slowing during the Great Recession, that’s been the trend for the past 40 years and the United States is not unique. Our health care spending growth rate is in the middle of the pack among developed countries.

Clearly we are on an unsustainable path. With each passing year, health care crowds out more and more other goods and services we want to consume. If it were possible to stay on the path we are on, eventually we would have nothing to eat, nothing to wear and no place to live — but we would all have really great health care.

We’re Busted.

Now even though the path is unsustainable, it is still the path we are currently on. Private health care spending, Medicare, Medicaid — the entire health care system ― is growing twice as fast as our ability to pay for its growth.

But the Obama administration, desperate to promise benefits that it knows it cannot pay for, has found a solution: making up budget numbers.

The problem begins with the Affordable Care Act (ObamaCare). Every time the administration talks about this new entitlement, they make it sound like it’s an enormous free lunch. Everyone in America has been promised affordable health insurance and the only people who are going to suffer are a few rich people (the top 1%).

Unwilling to raise the taxes needed to pay for this entitlement, the administration decided to fund almost half the cost by robbing Medicare. The figure is $716 billion over the next decade, but that’s just the beginning. Under the Affordable Care Act, Medicare is set to grow only a tiny bit faster than the growth of national income — forever!

So let’s recap. Spending on the elderly and the disabled will be growing at one rate while the rest of the health care system will be growing at twice that rate. The Medicare Office of the Actuaries has included two graphs in the latest Medicare Trustees report showing what this will mean. These graphs — which have never appeared in the mainstream media or even been referred to by the mainstream media — show Medicare doctors’ fees dropping below Medicaid fees in the near future and falling progressively behind Medicaid and private sector payments, indefinitely into the future.

One out of seven hospitals will leave Medicare in the next seven years, say the actuaries, and beyond that things just get worse and worse. Access to care will become a huge issue as waiting times to see doctors and enter hospitals grows. Harvard economist Joe Newhouse foresees senior citizens seeking care where Medicaid patients and the uninsured now go — to community health centers and to the emergency rooms of safety net hospitals. From a financial point of view, seniors will be less attractive to doctors than welfare mothers.

Now if the administration had been willing to come clean about all of this, I would say that’s what leadership is all about. It’s about making tough choices. Seniors will have to have less so that younger folks can have more. But that of course, is not what the president is saying. Time and again, the president, the vice president and every leading Democrat in Congress have referred to the Medicare spending reductions as “savings” that will not harm the elderly in any way.

This is not leadership. This is not making tough choices. This is bait and switch. And if the administration won’t own up to what it has done today — when there is no obvious pain — what do you think future politicians are going to do when real seniors can’t find a doctor who will see them?

Even after robbing Medicare, the administration still did not have enough money to pay for its new entitlement. So what did it do? It pulled another bait and switch. Buried deep in the 2,700 page legislation is the little reported fact that after 2018 the subsidies for private health insurance are going to grow at the same rate as Medicare — i.e., just a tad faster than national income is growing.

Remember the Democrats’ complaint about Paul Ryan’s Medicare reform plan? The “premium support” seniors would get to buy private insurance would grow at a slower rate than the actual premiums — shifting more and more of the cost to seniors through time. Well, that’s exactly what the Democrats are planning to do under ObamaCare to young people. The difference is that the Ryan plan was an undeveloped concept, whereas ObamaCare is the law of the land.

Think about this for a moment. The new law will force all of us to purchase insurance whose cost is likely to grow at twice the rate of growth of our incomes. But after a few years, the subsidies will drop down to the lower growth path as we are all forced to spend more and more of our disposable income on a health plan that will become increasingly unaffordable!

And if you get insurance from your employer, there are no subsidies at all — except for the smallest firms.

If you think any of this is politically sustainable, I have a bridge in Brooklyn I want to sell you.

If you don’t think what I am describing is sustainable, then beware that all the budget numbers coming out of Washington are wrong. The real budget crisis is much, much worse.

The Public Choice theory posits that this is how economists should expect politics to work. But, I’m not sure at what point in our history Members of Congress became so ideologically driven; and so money hungry, that Members of Congress became willing to make additional promises they know cannot be kept – knowing that future Congresses would have to suffer the consequence and be forced to clean up the current Congresses mess.

This article sounds identical to the ‘unsustainable health care costs’ and ‘deceitful D.C. numbers’ that were being argued throughout the 90s, 00s, and specifically just prior to the 2008 elections. The only difference is that the protagonist has changed so we now feel obliged to attack any solutions that he puts forth. People continually demand solutions from D.C. yet are unwilling to take the knocks needed to address the problems.

Yes, the private health care industry costs are soaring. The only solutions left to Washington, short of nationalizing the industry, is to reallocate costs and benefits between government, industry, and the American public. Obamacare reduces government costs at the expense of industry and the public. No evil legislation, just a new balancing act. Does Mr. Goodman have a solution to put forth … other than returning to from whence we came?

There is one comforting thought — as of Jan. 1 Congressmen and their private staffs will have to get their health insurance via an Exchange, no longer through FEHBP. Not clear yet how much subsidy they will get (or under what authority), but they will see “up close and personal” how Obamacare is unfolding.

It is all about accountability and practicing the real accounting. First place of defense of our rights is congress or changing the senate composition. Most of the senators either don’t know what they are talking about or deceitful. Our constitution is based on small govt. and Govt. doing certain minimum things. Congress need to vote down and enforce oversight on the Govt. intrusions and waste. Second Companies are supposed to keep pension funds independent and actuarially sound. They didn’t and broke Pension Guaranty fund , in addition to breaking the lives of many a seniors. May be Govt. did not do proper oversight , because Govt. itself is at fault. All trusts (soc sec, medicare,medicaid, and public employee) should be totally independent. Requiring these funds(soc sec, and medicare) to lend money(that too is a farce) to treasury only at deflated interest rates is a sin in itself. If Soc sec makes 4.5% return on its investments as opposed to less than 3%(and falling), it can be solvent w/o any cutting or increasing taxes. Besides concentrating power or money in one place never works. Retirement and health savings should be controlled by individuals or their corporate benefactor trusts, with proper oversight. All this cheap money is only making the middleman rich. Instead we need to invest directly or thru producers in realizing maximum ROR on our assets, be they reserves or cheap borrowed money. Govt. has enough assets to spend what it needs to instead of taxing. Equality is essential , but it need to be in opportunity equalizing , not wealth redistribution. This is where communists and socialists go wrong. True capitalism is opportunity for the motivated people. I know you are focusing on health care. But unless we focus on behavior of our Governing bodies, we will never get proper solutions to health care.

The Constitution guarantees us the Rights to Life, Liberty, and the Pursuit of Happiness. It does not guarantee us long life, yet somehow we have decided that the young must pay for the old. This is irresponsible. It is also just as foolish to mandate that the old pay for the young. Here’s a novel idea: let each person pay for themselves. If you can’t, go to a charity hospital.

Al, those numbers in the 90’s and 00’s were valid as are the numbers today. When the government kicks the can down the road (read: prints money) the crisis doesn’t seem real, and our pitiful moronic population is lulled to sleep by politicians with no conscience.

Al, do you really actually still think that the government can successfully “allocate resources”? I hope not. Yes, Goodman does have solutions (other than from whence we came), but in order to understand them you will have to abandon your entitlement mindset.

That comment is essentially: “We understand X. I don’t understand when X suddenly began to apply!”

In any case, Tammany Hall politics have existed longer than the American political structure. The shysty subset of political action that “Buster” is describing exist because these actions are allowed within the informal constraints of political action. This action is more wide spread in times and places where these constraints are looser. For example, during wars and other crises (real, imagined, or declared by fiat) government size and scope expands dramatically allowing for more corrupt (and marginally corrupt) decisions.

Obviously being able to grant favors is a valuable right, so we should expect pressure on politicians to declare crises, create crises, and rile up people’s fears generally. This has the added benefit that when one Congress passes absurd policy it can set up new crises for future congresses to “solve.” There are no shortage of examples: health policy, drug policy, foreign policy, schooling policy, etc.

What galls me is the total disconnect between the government’s criticism of the health sector and its intention to put millions of people through it. If it is so bad and too expensive, one would imagine that some better homework on what works and what doesn’t would create better policy.

Another issue, so important, is that not only did Congress write this absurd law, but it will be a defacto board of trustees making decisions for the very healthcare systems that it disparages. It is hard to see HHS being capable of partnering on risk contracts under the ACO model with integrity; staying faithful to the government’s side of the bargain, asking for achievable changes, and not changing rules in mid-stream.

A case in point about the dysfunction of our government is the challenge by the FTC brought on two organizations in Ohio that are merging–a hospital and a medical group. Supposedly, this is anti-competitive. Yet, this is the very model that Obamacare is looking for. Does no one think about the conflicts between an old concept of healthcare and the demands of the 21st Century?

The national government cannot run this important sector.

As a reminder, healthcare has two distinct roles–essential healthcare that does improve health, and a consumer good, such as cosmetic surgery. While the latter role is generally paid for directly by the patient, it should be allowed to be what it is and not be lumped into the essential healthare numbers to make them look worse.

Another reminder–people talk about the costs being unsustainable, but do not bother to recognize the positive effects of obtaining good healthcare, and there are many. Just imagine if a third of the medical community were to retire more or less at the same time—we would suddenly discover that we wanted a robust healthcare sector. Obamacare’s incentives are definitely going in the wrong direction.

Wanda Jones writes, “….merging–a hospital and a medical group. Supposedly, this is anti-competitive. Yet, this is the very model that Obamacare is looking for.”

Wanda, this is precisely what the Obama administration is looking for. They are not particularly worried about the competitiveness of the care providers at this point in time. Once everything has been trimmed down to a few giant organizations in both the service and financial sectors, the government will enter stage left and do what they have always wanted to do (starting with price controls). Who needs competition?

Good article, John. May I add:
When the Obamacare figures were “concocted,” so that “low information” representatives and senators would vote for the bill because it was presented as one which would save money, the Congressional Budget Office was given a set of figures and came up with the answer the Democrats wanted. It was so patently absurd (Medicare savings counted twice, assumption that CLASS would work with even more contributions needed by patients, the assumption that cutting that $716 billion to “providers” (we used to be called doctors or physicians), wouldn’t lead to a loss of doctors…that its faults were in the open. The CBO just used what it was given.
You note that Medicare rates of reimbursement to doctors and hospitals is programmed to decrease. We don’t even have to wait for that. The comparative example I have used for years, one in terms the nonmedical American can understand: Already, at this time, doctor reimbursement would equate to paying a gas station owner 85 cents a gallon for Gasicare, and 80 cents a gallon for Gasicaid. My own doctor of 25 years can no longer see me as his reimbursement from Medicare is less that his office overhead.
And what insurance plan denies the most procedures, denies the most claims?: Medicare.
As a physician, would I trust hospital administrators to be honest and pay fairly if govt payments for my work were sent to them? Not a chance. Their dishonesty has been displayed to me time and again.

Karl, i’ve tried to no be too argumentative this time but your post compells me. You have no faith in Obamacare. You have no faith in the Congress. You have no faith in the CBO. You have no faith in hospitals administrators. You have no faith in the Medicare or Medicaid systems. You have no faith the the $716 billion was trimmed from Advantage Insurers, not ‘doctors’. You have no faith in the free market when your doctor barters for more money from you … and there is nothing stopping you from picking up a standard insurance policy so you can keep him accept your tight grip on your pocketbook. Life is mostly perspective, and can be as wonderful or as bleak as one’s faith in themselves.

Al, Please do participate. Not argumentative. But participate in a critical conversation. For puritan of total equality, the average individual costs for health care is about $5k. for 300m people that is $1.5T. u could argue why not govt give each individual the $5k and done with it. That will have the least administrative cost. But if u make it any more complicated the administrative costs and interference costs will double ur costs. What u need to do ia to peel of both noise of administration costs and interference costs. That is why on the other end the good dr from Johns Hopkins suggested just go with a HSA solution. Then u have a pure competitive market. Yes, people need to get educated. The cost of that education is small compared to the cost of education we are already spending. Do u know that there is a huge underground economy in health care, where ethnics go to Drs. from their own ethnicity and get treated for a lot less? Do you that many innovations are happening in the private provider market? Let us not waste our time on idle worship whether the idol is person or philosophy. Let us face the facts. If you claim that providers are minting money on “poorly informed” patients, why is that all providers ROR is not in the double digit percentage figures? Have you analysed the finances of providers whose financials are available in public. People who are attacking Obamacare or Obama are not attacking these names or personalizes. They are attacking the approach. There is a lot of waste in our system. Unless we simplify it, u won’t be able to separate the weeds from the substance. Would love to hear ur critical comments.

Ramesh, I’ve never been scolded so nicely before. Thank you and I apologize to all for digressing into the emotional side of the topic … even if it is to defuse other emotional comments.

Yes, players and facets of the health care industry are innumerous and it is an extremely complex issue. I have no horse in this race, so my view is objective. After studying the PPACA, as an overall approach I find merit in all aspects of the program so I am a bit argumentative when it comes to other’s disparaging remarks. (we’ll see if that perks some eyes)

Though the HSA and ‘pure competitive market’ concepts are idealist in design, human nature precludes governmental non-intervention. It’s all still a balancing act between providers and patients. The people demanded rebalancing in 2008. The government is simply acting as leverage and referee for the patients in the forms of Medicare, Medicaid, and Obamacare. There is no solution that will keep all parties happy and I guarantee that the balance will change with future administrations as well.

Al, Thank you for a nice reply. The biggest problem in solving problems is complacency. Everybody like to complain. Very few people like to examine the facts(data) closely. Latest BLS stats say Employer spending on health insurance is 6.8% of total costs or app. $4500 per employee. Even though it is a significant no. , most employers pay lip service to the issues. They are afraid of change , because employees complain on any changes. Yesterday a CEO told me that is the biggest issue. So much is driven by fear. We need to start dialogues to pull these fears into the open. This is where the leadership is lacking in this country. People get the Government they deserve. We in the USA has the best possibility of conducting critical conversations. We used to do it better. We don’t do it now. We complain in the air. And end of becoming disrespectful of others. My best advice to our citizens: Get serious.

Al, prior to ’65, half of all seniors had no health care coverage. The government stepped in and offered providers a very large pool of new patients, in exchange for better rates. I consider the government as the people’s agent and this action as leveraging. Ongoing health care legislation to keep fraud down, prohibit discriminating, and maintain minimum health care standards are called ‘Refereeing’. However, the government, for doing this, gets paid in the form of Medicare premiums, taxes, etc. Obamacare is following the same principals. They introduce another large pool of uninsured for providers but leveraging is still part of the game … in addition to leveraging insurers to moderate their profits and system gaming.

Medicare was certainly helpful. But better alternatives were not explored. Health exchanges are effecting the whole world of health care. The costs and multipliers are not properly calculated. One good thing out of obamacare. it woke up alternate plans. Alternatives are springing up faster. But private exchanges has some of the falacies as public exchanges. They are not much more than glorified brokerage sites, except they have the ability to negotiate rates. But it is still an introduction of another middle man(w/o an adviser). Medibid is a grat idea, but too small right now. Plan effectiveness software is coming on strong in the self-funded plans. But all of these are barking on the wrong tree. A good start will be Ben’s HSA idea and UAW’s Employee welfare benefit fund. PPACA is taking attention away from innovations. Do you know how many people are waiting into get into exchanges and postponing taking health insurance right now? Who is collecting data on this? I have some idea , because I am in the front line.

Al Baun, whatever history you wish to provide, meaningful or meaningless, has little bearing on my comment’s response to your prior comment:”The government is simply acting as leverage and referee for the patients”

My response remains the same: “The government has become a player and a player cannot simultaneously be the referee.”

If want me to “consider the government as the people’s agent ” then I have to have the right to fire the government and hire another entity.

“..Obamacare is following the same principals. They introduce another large pool of uninsured for providers but leveraging is still part of the game … in addition to leveraging insurers to moderate their profits and system gaming.”

Al, “leveraging” on the part of the government is not the best method for getting the highest quality product or service for the most competitive price (assuming that is your quest). Even if your objective is to have every person with equal access to healthcare (and to hell with the cost), that is best accomplished in a competitive marketplace, unburdened by government “leveraging” (read: bureaucratic preferential treatment and micro management).

Apparently none of the authors of the ACA had (has) any remote clue as to the market can impact the efficient delivery of healthcare. It seems the entire legislation was written assuming that all intangibles associated with a 2000 page document were of no consequence. Those assumptions are going to be proven catastrophic in the next two years.

Al, it is your duty to fire (vote out) what you consider an ineffective agent (government). If enough of the board agrees, then its gone.

Frank, so in lieu of a new current proposal to negociate for or referee the needs of over 59% of the population, you suggest eliminating Obamacare, Medicare,Medicail, Tri-Care, VA, FEHBP, Indian Health Services, Schip, and EMTALA and going back to the free market days of bartering chickens reservations at almshouses?

Al Baun, it is nice to know that you have determined that other people should decide who and how my most personal needs should be cared for when I am ill and helpless. Next I expect to hear that you think the government should be my agent for legal representation and have the government be the prosecutor, judge and jury. This is fine thinking for a colony of bees with a queen bee, but stamps out the ideas represented in the Declaration of Independence, The Constitution and The Bill of Rights.

If you remember correctly the idea behind a Constitution and a Bill of Rights was to protect the rights of the minority. It was not rule of the majority (vote) over my personal life. Rule of the majority that you seem to so favor means that 51% of the population can vote to enslave the other 49%.

“in lieu of a new current proposal to negociate for or referee the needs of over 59% of the population, you suggest eliminating Obamacare, Medicare,Medicail, Tri-Care, VA, FEHBP, Indian Health Services, Schip, and EMTALA and going back to the free market days of bartering chickens reservations at almshouses?”

Al, hmmm…Not exactly, although some of those suggestions are tempting. But I am afraid that Mr. Tyson has such a monopoly on chickens that we would have a difficult time establishing fryers as an exchange medium.

However, without eliminating many of those programs you cite we could certainly restructure the basic (premise) of any federal program that centralized management and control of services and prices should be the default setting. And specifically, yes, Obamacare is such an unmitigated disaster it should be done away with entirely leaving us with room to rebuild our healthcare delivery system properly (structured by people who have a clue about how to do so).

Ralph, I remember the village farmers used to bring fruits,vegetables and grains as gratuity to the free services my dentist doctor used to provide to them. That is how the dentistry become affordable and got attention from people who were ignoring it. Even to day, even in this country there are many patience getting Doctor’s services in deeply discounted fee. This is all part of legal underground economy. Given the freedom, people can be very creative. You stifle the freedom , you will stifle the services, the quality of services and hurt the economy. What you will have is an oligopoly of low information geniuses.

Ramesh, you are 100% right. The PPO price fixing model with produces variation of 1,000% or more in a network which the third party payer system is based on is deeply flawed. That’s why at MediBid, we allow doctors to set their own rates and to compete based on price and quality.

Ramesh,
Thanks. Simple dental procedures are usually under a couple of hundred dollars, and savings in many cases would not be significant enough from the perspective of most dentists for them to participate.

A few thoughts. There are two things in play here. First of course are the Democrats and their subsidiary media. Then there’s this abominable law itself. It does contain some things that people like.
Things that “sound right”. Unfortunately the GOP has failed to submit and promote a definitive, understandable, and viable replacement measure, which also reassures that “sound right” benefits granted for so-called “pre-existing conditions”, 26 year olds, portability, etc. won’t be withdrawn.

Obamacare is about 80% bureaucracy and 20% benefits to the insured. Why the hell do Republicans have so much difficulty enunciating this reality? Is it because most of them actually favor some sort of Government-centric, “Obamacare light” alternative? I have no idea. Not that I really expect to understand the actions of a Party, which designates the man who ran the 2012 GOP electoral “train-wreck” [Reince Priebus] to design the “new and improved”, model for 2016.

Anyway, Romney squandered his chance to discredit the Democrats healthcare atrocity with a simple, and repeated delineation, starting with the difference between Romneycare’s 70 pages and Obamacare’s 2700 pages. This failure meant that Romneycare hung around his neck like a rotting albatross throughout the campaign.

Opposition is slipping, but you have to watch the sampling numbers on these polls. Despite the fact that Obama had less than a 4% advantage over Romney in 2012, the polls usually usually give Democrats 7% or more advantage. February’s Kaiser Family Foundation health tracking poll puts opposition to the law at 42 percent and support at 36 percent; in Kaiser’s November poll, 43 percent said they supported the law and 39 percent opposed it.

The media has consistently remained positive or neutral at worst. Since there’s nothing to fight for, too many opponents have given up. In other words this isn’t really another battle lost by the Right, as much as it is another battle, not fought. Maybe they have a game-plan, but from here it seems the GOP, states, insurers, and providers seem content to play the role of useful idiots or silent spectators as they watch their respective Party, their rights, their businesses and their professions get trampled into oblivion. Perhaps the sheep will finally bleat in protest, after “single payer” is imposed.

Jim, insofar as the strategy of foisting the Obamacare atrocity on the American public, it seems the “boiled frog” strategy is in play by the Obama administration. However it may not work this time because even elements of the traditional media are beginning to question the bureaucratic costs of this mess. This is definitely not going well, and there is no chance that it will get better as time goes by. What happens when this thing blows up completely is up in the air, and this is a golden opportunity for a right leaning politician to gain a lot of ground IMHO.

@ Jim McCaffery “Unfortunately the GOP has failed to submit and promote a definitive, understandable, and viable replacement measure, which also reassures that “sound right” benefits granted for so-called “pre-existing conditions”, 26 year olds, portability, etc. won’t be withdrawn.”

Jim, as far as Republican input into the ‘abominable law and health care atrocity’, there are over 150 sections of the PPACA that were offered by Republicans, it was conceived by the Republican’s Herritage Foundation, and it was modeled after previous Republican ideas and programs. The PPACA is a bi-partisan program, like it or not.

Poll numbers have little to do with the PPACA proceeding as planned or that those opposed to the program won’t be the first to sign up for it. It simply means that some people are succumbing to misinformation and defamation out there.

Al Baun, “like it or not” the Republicans voted against the law and the Heritage Foundation has been embarrassed by their support for a mandate on a state level. They very much opposed the mandate since and advocated against a federal mandate.

There is a big difference between state action and federal action, something the left fails to note.

You are absolutely incorrect about the authorship of the PPACA. I’m not sure what you mean about the “150 pages” (which is a joke anyway regarding partisanship when one considers the 2000 pages of law), but other than the basic premise of the unfortunate Massachusetts experiment being a sort of model for the monster there is no conservative or even quasi-conservative input into this Mutt.

There is no appreciable consideration any place in the legislation to promote the CDHC concept, which is the cornerstone of conservative thought. In fact, the ACA goes out of its way to contain any significant adoption of HSAs simply because the lynchpin of Obamacare (top down administration) is anathema to individual’s controlling their own healthcare issues.

Yes Ralph, isn’t it amazing that no one notices this type of trend and connects the dots?

Frank, well said. The fundamental issue here is patient control followed by provider negotiation and third party facilitation. No Government control. Conservatives have to make Republicans not veer away from this. Like it or not the lifeblood of Republicans is the principles. W/o it they will be a dead party.

Obamacare has not really cut $716 billion from Medicare. Lowering fees does not always lead to lower spnding. Doctors and hospitals either do more procedurs, and/or move their practices to the fees that are not controlled.

So the budget situation is worse than Dr Goodman even thinks, and he is a pessimist!

One other note– Ralph, I have no hard statistics, but I would not be so nostalgic about America before Medicare. I think a lot of seniors stayed home in pain because even though prices were low, they had no money for health care. This has as much to do with Social Security as with Medicare. Some Seniors were living on cat food back them.

The average employer costs for employee health benefits are 8.5% of total employer costs per employee in 2012 according to BLS. That is about 11% of gross salary including paid leave. a 4% increase per year is not a killer for the companies. Particularly if they can afford to increase wages by 2-4% and/or find better process like CDHP solutions. What all the Govt intervention is going to do add additional processes and additional expenses and distortions. We all know medical care has improved leaps and bounds over the years. It s easy to give the credit to medicare and medicaid. A good chunk of population will always fall behind the norm in taking advantage of advances in society. Will focus on better education(not necessarily degrees) produce better solutions? We may be able to learn lessons from history, but a better way is true evaluation of solutions thru crucial conversations on current conditions.